Ventura ruling halts pension-reform plan

/ AP

Campaign worker Nate Neuenschwander, left, watches election returns at a campaign party for No on Measure B in San Jose, Calif., Tuesday, June 5, 2012. As state and local governments across the country struggle with ballooning pension obligations, voters in two major California cities cast ballots Tuesday on sweeping measures to curb retirement benefits for government workers. San Jose Mayor Chuck Reed, a Democrat, joined an 8-3 City Council majority to put San Jose Measure B on pension reform on the ballot. (AP Photo/Paul Sakuma)

Campaign worker Nate Neuenschwander, left, watches election returns at a campaign party for No on Measure B in San Jose, Calif., Tuesday, June 5, 2012. As state and local governments across the country struggle with ballooning pension obligations, voters in two major California cities cast ballots Tuesday on sweeping measures to curb retirement benefits for government workers. San Jose Mayor Chuck Reed, a Democrat, joined an 8-3 City Council majority to put San Jose Measure B on pension reform on the ballot. (AP Photo/Paul Sakuma) (/ AP)

Rhode Island’s state treasurer has famously said that efforts to reform pensions for public employees is not about politics, but about math. Yet in California — despite well-publicized debt and municipal insolvency problems caused by pensions’ “math” problems – reformers can’t find a course around political and legal obstacles.

That act, passed in 1937, provided a process for counties to create pension systems separate from the California Public Employees’ Retirement System. Twenty counties developed systems under that law, and they include big players such as Los Angeles, San Diego and Orange counties. Reform in those counties would make a large dent in the state’s problems.

Activists chose Ventura because of an active group of taxpayer advocates, although the Board of Supervisors backed the union lawsuit that triumphed this week. Reformers may appeal the verdict, but there’s no way to spin this as good news.

“Reduced to its most basic components, this case involves the question of whether or not a county, through the initiative process, may withdraw from a statewide system enacted by the Legislature,” explained Judge Kent Kellegrew. He ruled that it can’t.

Even though the Ventura system is separate from the state system, the judge found that “there is nothing within (the 1937 Act) that provides for withdrawal by an accepting county.” The judge said counties need to petition the Legislature for a change. But the unions have even more control in the Legislature than they have in many municipalities, which makes pension reform a nonstarter there.

The judge also ruled that the measure violates the “single-subject rule” because it cuts pensionable pay and provides a new retirement system for new hires. Initiative supporters were outraged by that conclusion given that they both involve pension issues.

The Ventura measure was based closely on the reforms that have been implemented in the city of San Diego – a 401/k-style retirement plan for new hires, a cap on pensionable pay and an end to pension-spiking abuses.

Former San Diego City Councilman Carl DeMaio, now a congressional candidate, pushed the Ventura model given that the San Diego approach has withstood court scrutiny, even though the state Public Employment Relations Board continues to challenge the validity of the June 2012 initiative.

By contrast, the San Jose approach, also approved by voters in June 2012, offered current city employees a choice — accept a lower-benefit pension plan or pay more for the current plan. In December, a court ruled that cities cannot reduce pension benefits, even on a go-forward basis. San Jose is appealing.

Efforts to amend the state constitution to allow such changes went nowhere, after state Attorney General Kamala Harris provided a title and summary for a proposed statewide measure that backers say was so biased that it would make gathering an adequate number of signatures nearly impossible. That’s what led to a county-by-county approach.

San Diego is a charter city, not a “37 Act” county, so this week’s decision doesn’t have any impact on the city’s reforms. “The issue in San Diego has nothing to do with an attack on the substance of the initiative as illegal,” city attorney Jan Goldsmith told me. “Rather, PERB contends that the city should have bargained with its labor unions before placing the San Diego initiative on the ballot.” The city didn’t place it on the ballot, he adds. It was put there by voter petition.

DeMaio was stunned by the Ventura decision, given that judges rarely keep a measure off of the ballot. That decision reinforces for him the need to once again focus on a statewide ballot initiative. I admire his indomitable spirit. Despite recent good investment returns, the math still adds up to an enormous problem. But it’s getting harder to envision a reform strategy that might work.